ROSENBERG: One Of The Most Reliable Economic Indicators Peaked In July

Sam RoDecember 5, 2012

When the official headline economic indicators don't work, savvy investors turn to the unconventional economic indicators.

In his latest Breakfast With Dave note, David Rosenberg visits a signal being sent by the restaurant sector:

EATING OUT IS OUT

Our hedge fund desk has always told me that among the most reliable cyclical indicators for the American consumers is the restaurant sector. Traffic is slowing down precipitously and the companies are issuing negative guidance.

I took a look at the monthly details from the latest PCE data and saw that in nominal dollars, consumer spending on eating out sagged 0.4% in October and has contracted now in three of the past four months. The YoY trend peaked at +5.7% in July and has since slowed to +4.4% which is the softest pace in eight months (the three-month trend which a year ago was running at 7.5% at an annual rate is now close to stall-speed of 2%). As a sign that families are becoming more cautious in their spending and eating habits, grocery shopping is up in two of the past three months and at double the trend (at4%) of the restaurant industry.

ECRI's Lakshman Achuthan has argued that the economy went into recession in mid-2012. This evidence seems to support that thesis.

It’s just my wife and I at home now so we eat out more than we should. I also entertain customers while when travelling so I see a lot of restaurants and a good cross section of Quality from Morton’s to Applebees and I can tell you that dining out is waaaaaay down. My wife and I stopped in at an Applebee’s last Friday night about 8:30 and were the only people in the joint the entire time it took to eat our dinner.

2
posted on 12/05/2012 9:55:46 AM PST
by pgkdan
(We are witnessing the modern sack of Rome. The barbarians have taken over.)

No surprise. Maybe the public is finally realizing that the cost of dining out has gone sky-high over the past years. I have watched the casual restaurant check for two people over the past several years balloon from around $17 including tax and tip to around $32 to $36 today, here in California. Just in the past year alone, that check size has increased by at least $5 or more.

Every time I see what appears to be a brand new menu, I check the date printed (usually on the bottom of the back) to see if it recently was printed. If so, I look at the prices to see the increases. We are seeing new menus printed twice a year. End result is that we are dining out less and using discount coupons more.

I think this indicator is spot-on. We don’t eat out - at all - these days, unless otherwise unavoidable. I’d say less than once a month at a real, honest-to-goodness sit down at a table and order from a menu restaurant. Fast food and pizza less often than before, too.

And a huge part of that is the cost and a tight budget.

9
posted on 12/05/2012 10:03:41 AM PST
by kevkrom
(If a wise man has an argument with a foolish man, the fool only rages or laughs...)

We haven’t eaten out since January. We do get takeout once a week or so, but that’s not nearly as expensive. My husband roasted a large chicken last week end, and then made soup with what was left over. Delicious and so inexpensive compared to a restaurant!

10
posted on 12/05/2012 10:04:21 AM PST
by trisham
(Zen is not easy. It takes effort to attain nothingness. And then what do you have? Bupkis.)

I usually eat the same thing 7 days a week at Chili's for dinner. It is on my commute path home and saves adding 20 miles to my commute for an alternative. On Monday night the place was deserted. Two tables other than mine. Last night was only a little better. Still most of the dining room empty. The manager had to send staff home early. If the pattern holds, I may lose another dining option. I lost Chevy's last year along with my favorite diversion at Borders. El Torito's modified the only item on the menu in a fashion that made it inedible for a gluten intolerant diet.

Depending on the tax impacts, I may be making even more adjustments to my dining habits.

Hubby and I eat dinner out once a week. It is our only real ‘outing’ away from the house. I have found restaurants with specials like 2 for 1 certain nights of the week and I use Restaurant.com alot. They have some really great sales. Overall it costs us about $50 a mnth to eat out once a week. Well worth it.

I would go bat crazy doing that. One time we had some Japanese customers over for a couple of weeks. The first day my manager told me to take them out for lunch. We went to a local place and I explained what chicken fired steak was. Well they all had chicken fried steak. They kept asking to go back day after day after day the same thing chicken fried steak.

After 9 days I was ready to never have chicken fried steak again. The last day I convinced them to go some place else. We talked about other items on the menu and every one seemed interested in this or that. Well when the waiter came the boss ordered chicken fried steak and then they all ordered CHICKEN FIRED STEAK.

40
posted on 12/05/2012 11:52:42 AM PST
by Syntyr
(Happiness is two at low eight!)

I prefer consistency to illness. I tried to eat the grilled chicken Mexican Caesar at El Torito's. I was sick for 8 days due to gluten contamination. I can substitute a 9 oz steak and baked potato with butter only at Applebee's without harm...except for another $5 added to my bill.

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